Three Changes to Know Before Investing in Myanmar

The process of opening up and liberalizing an economy is never an easy thing.

It’s especially hard for Myanmar, a Southeast Asian country which has been closed off from the world until recently. A stronger rule of law is forming as the years go by, However, anyone looking to buy property or stocks should do their research before investing in Myanmar.

There are three key areas where the government has big plans for change. They are the financial incentives for foreign investors, the Myanmar-EU Investment Protection Agreement, and a new stock exchange.

Myanmar is Reducing Incentives for Investors

Foreign investment is one of the biggest forces in shaping Myanmar’s economy. As such, the government is taking measures to improve the investment environment and draw more capital. They’ve mostly done this by updating Myanmar’s legal structure and modernizing its infrastructure.

In particular, with regards to investment, the country has combined two of its investment laws. These are the Foreign Investment Law and Myanmar Citizens Investment Law.

Investment into the country has steadily increased. The majority of FDI flowing into Myanmar focuses on its natural resources, particularly the hydropower, natural gas, and mining sectors.

However, investment now even surpassing the government’s expectations. There’s now concerns that incentives for foreign investors are “excessive”.

The government is even on board. They believe attractive incentives could be lure “irresponsible” investors. Because of this, experts believe incentives for foreigners investing in Myanmar will be sharply reduced.

Tax relief for automobile imports is one incentive on the chopping board. This perk substantially brought down the price of vehicles in Myanmar. Also, the government will require an NGO to inspect any duty-free materials brought into the country.

Myanmar-EU Investment Protection Agreement

A legally binding level of protection for private investment in Myanmar and all 28 EU members was finished in early 2016. Many tough negotiations took place before this point. Early February 2015 year saw the first round of negotiations. The second round happened in May.

According to U Aung Naing Oo, the director general of Myanmar’s Directorate of Investment and Company Adminstration, the agreement will attract firms with quality ethics. These companies will create jobs, increase exports, and transfer technology and knowledge to the local population.

U Aung believes most of the EU firms are perfect matches with the local criteria. He said the agreement will go even further by protecting investors from Myanmar who wish to enter the EU market.

The EU now has a trade deficit with Myanmar. Net exports from the EU to Myanmar had a value of around 600 million euros in 2016. But the EU imported over 1 billion euros worth of Myanmar’s products during the same year.

Further analysis shows the biggest European investors into Myanmar. The UK is leading the race with a large gap between its next competitors, the Netherlands and France.

Stock Exchange to Help Foreigners Investing in Myanmar

In an effort to catch up to its more prosperous neighbors in terms of financial sector development, Myanmar will be seeking to open its very first bourse in December 2015.

The Yangon Stock Exchange (YSX) is currently in its development stage. Two Japanese firms, the Daiwa Institute of Research Ltd and the Japan Exchange Group, are helping out. One side effect of Myanmar’s new stock exchange is the banning of all over-the-counter (OTC) markets.

Transactions on the YSX will not involve any direct cash transactions, according to the finance minster. Instead, Kanbawza Bank will process all transactions.

Security measures are also being implemented. For example, any transactions higher than 100 million Kyat (~US$78,000) will obligate the banks involved to inform the financial crime unit and the Central Bank of Myanmar’s anti-money laundering program.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.